Armor Re cat bond completes, rated and lists in Bermuda

The Armor Re Ltd. (Series 2013-1) catastrophe bond issuance for first-time cat bond sponsor American Coastal Insurance Company has now completed successfully. The one-year duration Armor Re cat bond provides American Coastal with a $183m source of fully-collateralized reinsurance capacity for named Florida storms using an indemnity trigger, so any tropical cyclone, storm or hurricane that is named by the National Hurricane Center.
The Armor Re cat bond saw a single tranche of notes issued, which began at $125m in size but grew by 46% to $183m by the time the transaction closed to subscriptions from investors and we understand that the deal was oversubscribed. The $183m Class A notes provide reinsurance cover for 91.5% of losses between an attachment point of $913 million and an exhaustion point of $1.113 billion.

Armor Re again demonstrated the value that the cat bond market offers to sponsors. The marketed coupon pricing on the transaction fell substantially by the time the deal came to market. The cat bond had launched with price guidance of 4.75% to 5.5% but settled at 4.25%, a reduction of 17% from the mid-point of the original price range.

The Armor Re Ltd. principal at risk variable rate note program, a shelf facility which will allow the sponsor to return to the cat bond market more cost-effectively in future, and the single tranche of $183m Series 2013-1 principal at risk variable rate notes were admitted to the official list as Insurance Related Securities on the Bermuda Stock Exchange (BSX) yesterday. The listing sponsor for the transaction was Appleby Securities (Bermuda) Limited.

Rating agency Standard & Poor’s has assigned its ‘BB+(sf)’ rating to the Series 2013-1 class A catastrophe bond notes issued by Armor Re Ltd. S&P reiterated its view that credit exposure to the sponsor American Coastal will be mitigated because it will prepay the quarterly insurance premium for the entire risk period at closing of the deal. In addition, S&P explained that if there is a potential covered catastrophe event American Coastal will pay servicer fees in advance.